Form 8873 Extraterritorial Income Exclusion

1. 8873 OMB No. 1545-1722
Extraterritorial Income Exclusion
Form
2008
Attach to your tax return.
Attachment
Department of the Treasury See separate instructions. 126
Sequence No.
Internal Revenue Service
Name(s) as shown on return Identifying number
Part I Elections and Other Information
1 Check the box if you are electing under section 942(a)(3) to exclude a portion of your gross receipts from foreign trading gross
receipts on line 15. Attach a schedule indicating which receipts are being excluded
2 Check the box if you are electing to apply the extraterritorial income exclusion provisions to certain transactions involving a FSC
(see instructions). Attach a schedule listing the affected transactions
3 Check the box if the taxpayer is a foreign corporation electing to be treated as a domestic corporation (see instructions)
4a Are you excepted from the foreign economic process requirements because your foreign trading gross
receipts are $5 million or less? Yes No
b If “No,” check the applicable box to indicate how you met the foreign economic process requirements:
(1) You met the 50% foreign direct cost test (see instructions).
(2) You met the alternative 85% foreign direct cost test (see instructions).
5 See instructions before completing lines 5a through 5c. Note: For transactions for which the exclusion is determined using
the foreign sale and leasing income method (i.e., line 44 equals line 45), complete only lines 5a and 5c(1).
a Business activity code b Product or product line
c Check the applicable box to indicate the basis of your reporting:
(1) Transaction-by-transaction:
(a) Aggregate on Form 8873 (b) Aggregate on tabular schedule (c) Tabular schedule of transactions
(2) Group of transactions
Part II Foreign Trade Income and Foreign Sale and Leasing Income
Caution: If a related person is also eligible for an extraterritorial income (a) Foreign Trade (b) Foreign Sale and
Income Leasing Income
exclusion, see Excluded property in the instructions.
6
6 Sale, exchange, or other disposition of qualifying foreign trade property
7 Enter the amount from line 6, column (a), attributable to the sale of property
7
formerly leased or rented for use by the lessee outside the United States
8 Lease or rental of qualifying foreign trade property for use by the lessee
8
outside the United States. Enter the same amount in both columns
9 Services related and subsidiary to the sale, exchange, or other disposition of
9
qualifying foreign trade property
10 Enter the amount from line 9, column (a), attributable to the sale of property
10
formerly leased or rented for use by the lessee outside the United States
11 Services related and subsidiary to the lease of qualifying foreign trade property for use
11
by the lessee outside the United States. Enter the same amount in both columns
12
12 Engineering or architectural services for construction projects outside the United States
13
13 Managerial services provided to unrelated persons (see instructions)
14 Enter the sum of the amounts from lines 6, 9, 12, and 13 of column (a)
attributable to foreign economic processes. Do not include any amounts
14
already included on lines 7, 8, 10, or 11 in column (b)
15
15 Foreign trading gross receipts. Add lines 6 through 13 in column (a)
16
16 Add lines 7 through 14 in column (b)
17 Cost of goods sold:
17a
a Inventory at beginning of year
17b
b Purchases
17c
c Cost of labor
17d
d Additional section 263A costs (attach schedule)
17e
e Other costs (attach schedule)
17f
f Total. Add lines 17a through 17e
17g
g Inventory at end of year
17h
h Subtract line 17g from line 17f
In column (a), subtract line 17h from line 15. In column (b), subtract line 17h
18
18
from line 16
19
19 Other expenses and deductions (see instructions) (attach schedule)
20 Foreign trade income. In column (a), subtract line 19 from line 18. If -0- or
20
less, stop here. You do not qualify for the exclusion
Foreign sale and leasing income. In column (b), subtract line 19 from line 18
21 21
8873
For Paperwork Reduction Act Notice, see instructions. Cat. No. 30732F Form (2008)

2. 2
Form 8873 (2008) Page
Part III Marginal Costing (Note: If you are not using Marginal Costing, skip Part III and go to Part IV.
)
Section A — Foreign Trade Income Using Marginal Costing Method
22
22 Foreign trading gross receipts. Enter the amount from line 15
23 Costs and expenses allocable to the amount reported on line 22:
23a
a Cost of direct material attributable to property sold
23b
b Cost of direct labor attributable to property sold
23c
c Add lines 23a and 23b
24
24 Subtract line 23c from line 22
25
25 Worldwide gross receipts from sales of the product or product line
26 Costs and expenses allocable to the amount reported on line 25:
26a
a Cost of goods sold attributable to property sold
26b
b Other expenses and deductions attributable to gross income
26c
c Add lines 26a and 26b
27 Subtract line 26c from line 25. (Note: If -0- or less, stop here. You may not use Part III to determine
27
your qualifying foreign trade income. Go to line 37.)
28 Overall profit percentage. Divide line 27 by line 25. Carry the result to at least three decimal
28
places
29
29 Overall profit percentage limitation. Multiply line 22 by line 28
30 Foreign trade income using marginal costing. Enter the smaller of line 24 or line 29 30
Section B — 15% of Foreign Trade Income Method
31
31 Multiply line 30 by 15% (.15)
32
32 Foreign trade income using full costing. Enter the amount from line 20
33 Enter the smaller of line 31 or line 32 33
Section C — 1.2% of Foreign Trading Gross Receipts Method
34
34 Multiply line 22 by 1.2% (.012)
35
35 Multiply line 30 by 30% (.30)
36 Enter the smallest of lines 32, 34, or 35 36
Part IV Extraterritorial Income Exclusion (Net of Disallowed Deductions)
37
37 Enter your foreign trade income from line 20
38
38 Multiply line 37 by 15% (.15)
39
39 Enter your foreign trading gross receipts from line 15
40
40 Multiply line 39 by 1.2% (.012)
41
41 Multiply line 38 by 2.0
42
42 Enter the smaller of line 40 or line 41
43
43 Enter your foreign sale and leasing income from line 21
44
44 Multiply line 43 by 30% (.30)
45 Enter the greatest of lines 33, 36, 38, 42, or 44. If you are using the alternative computation,
45
see instructions for the amount to enter
Note: If you do not have a reduction for international boycott operations, illegal bribes, kickbacks, etc. (see
the instructions for line 50), skip lines 46 through 51 and enter on line 52 the amount from line 45.
46 If line 44 equals line 45, divide the amount on line 45 by the amount
on line 43. Otherwise, divide the amount on line 45 by the amount on
46
line 37. Carry the result to at least three decimal places
47 If line 44 equals line 45, enter the amount from line 19, column (b).
47
Otherwise, enter the amount from line 19, column (a)
48
48 Multiply line 46 by line 47
49
49 Add lines 45 and 48
50
50 Reduction for international boycott operations, illegal bribes, kickbacks, etc. (see instructions)
51 Qualifying foreign trade income. Subtract line 50 from line 49. If -0- or less, stop here. You do
51
not qualify for the exclusion
52 Extraterritorial income exclusion (net of disallowed deductions). Subtract line 48 from line 51.
Enter the result here and include it on the “other deductions” line of your tax return or schedule
(see instructions) 52
8873
Form (2008)